Tuesday, March 28, 2006

Prosecution Rests in Enron

The prosecution rested its case today in the trial against Enron execs Kenneth Lay and Jeffrey Skilling. The few media reports on this development focused on the fact that prosecutors dropped a few of the charges (three for Lay, one for Skilling - both had dozens of charges filed) instead of the testimony of former employee Joanne Cortez, who told how Ken Lay had a line of credit with the company from which he would borrow cash - then repay the money with Enron stock. I can't find whether he did this because he got a better price for the shares than he would in the market at that time, or to evade reporting rules regarding the sale of shares by company officers (or both) but it's bad either way.

What's more, near the end, when even non higher-ups knew the company was spiraling out of control, Lay's credit limit was upped from $4 million to $7.5 million. He ultimately ended up borrowing $70 million which he repaid with stock that ended up being worthless. Apparently, he would borrow up to his limit, take the cash, then quickly repay the debt with stock and then repeat the cycle.

I'm not sure there's a hole dark enough or deep enough for Ken Lay. I'll be curious to hear what is said in his defense when his attorneys begin presenting their side of the case.

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